Search in:

AMP profit up, AXA merger ahead of schedule

John Collett

AMP has reported a solid result for the 2012 calendar year with net profit of $704 million compared to $688 million in 2011, a rise of 2.3 per cent.

Its financial planning, superannuation and self managed superannuation fund administration businesses performed well. The completion of integration with AXA, which AMP bought in early 2011, is ahead of schedule. But the results were held back by difficult personal insurance markets.

The financial services group declared a final dividend of 12.5 cents per share, 65 per cent franked. The company also recorded an underlying profit of $955 million, compared to $909 million in 2011.

Shares were up 0.9 per cent to $5.49 in afternoon trade.

Advertisement

"The strong performance of our wealth management business reinforces the benefits of the merger with AXA, with a suite of contemporary products and services that cater for all key market segments, supported by Australia’s leading financial advice network," AMP's chief executive Craig Dunn said at the results presentation on Thursday.

Since the merger with AXA, planner and adviser numbers have continued to grow. With more than 3600 planners, AMP has the largest adviser network in Australia.

Mr Dunn said the success of the North investment platform, which came with its AXA acquisition, has helped to grow market shares in superannuation and retail managed funds over the past year. Cashflows into the platform tripled to $2.2 billion during calendar 2012 following its rollout across the broader AMP advice network.

The company said the merger with AXA is ‘‘on track to be completed by June 2014, six months ahead of schedule’’.

The financial services group is capturing a greater share of fast-growing self managed superannuation fund sector (SMSF). Since establishing its AMP SMSF business unit, the number of SMSF accounts under administration has tripled during 2012.

"The ongoing strengthening of our core Australian business, along with our expansion into the self-managed fund sector and selected offshore markets through AMP Capital, continue to provide further opportunities for growth," Mr Dunn said.

AMP Capital won significant investment mandates in 2012 from large institutional investors including those from Abu Dhabi, Canada and China.

‘‘It a positive result with better to come’’, said Peter Warnes, the head of equities research at Morningstar.

He said the business will be helped by improving investment markets. As sharemarkets continue to improve, investors are switching from lower margin cash-style investments to higher-margin equity investments, he said.

Profits from insurance through AMP’s Wealth Protection division fell significantly. While the profit was $107 million in the second half of 2011 it was $56 million in second half of last year.

Mr Warnes said that while life insurance results were disappointing it was an industry-wide problem rather than specific to AMP.

On the difficulties with its insurance business, Mr Dunn said when family budgets are stretched they cut back or pull out of life insurance altogether. It is partly a cyclical problem and when the economy improves so will the insurance business.

‘‘We have got to persuade people that insurance is something that you should keep,’’ he said.

For most people their capacity to earn an income is their biggest asset and yet is one of the least insured of assets that families have, he said.

Clients of AMP planners who are finding it difficult to afford insurance will be reminded of the benefits with a view to having them take out less cover rather than letting their policies lapse altogether.

Net inflows into AMP Financial Services were up $1.152 million in 2012 compared to net outflows of $581 million in 2011. This reflected the success of its low-cost Flexible Super product, the North investment platform and the SMSF administration business.

Mr Dunn warned that further tinkering with the superannuation rules risks denting public confidence in the super system. The Gillard Government is considering increasing taxes on superannuation for higher income earners or those with higher superannuation account balances.

‘‘There is no doubt that we have one of the world’s best superannuation systems and it is the envy of many western democracies,’’ Mr Dunn said.

People need tax incentives to save for their retirement and they need to be confident that the rules of today will not be that different from the rules when they retire, he said.

On the outlook, Mr Dunn said he expects the business environment in Australia to remain challenging in 2013, although improving investor sentiment in Australia and overseas is welcome given AMP’s significant leverage to stronger investment markets.